Exxon Mobil: Why You Should Be Positive

Exxon Mobil (XOM) has put in a weak financial performance this year. Last quarter, the company’s revenue was down 33% from $111.20 billion in the second quarter of 2014. Also, Exxon Mobil had declared second-quarter net income of $4.19 billion, down 52% from the same period last year.

The oil and gas drilling major reported steep year-over-year declines in both its top and bottom lines as the pricing environment is not conducive, even though the country has increased production. For instance, ExxonMobil delivered 4 million oil-equivalent barrels per day, up 3.6 percent or 139,000 barrels per day.

Liquids volumes of 2.3 million barrels per day grew 11.9 percent, gaining from continued growths in the United States, Indonesia, Canada and Angola.

Moreover, the company distributed $4.1 billion to shareholders through dividends and planned share repurchases. But, will Exxon be able to make a comeback? Let’s check.

Expanding the business in weak times

ExxonMobil is benefiting significantly from expanding the production of key liquids amid weaker global commodity pricing scenario and thus, it is increasingly offering enhanced shareholder returns through strategic dividend payments and share repurchases.

The key oil company has lately entered into a contract with PBF Energy, Inc. for the strategic sale and purchase of its non-core refinery in Torrance, California, products terminals at Atwood and Vernon, and related California pipelines along with other key logistics assets that include operational centers at the strategic Southwest terminal and a lubricants disbursement facility at Vernon.

This is a good move as this will diversify Exxon’s business. For instance, its earnings for the second quarter of 2015 declined $4.6 billion year-over-year owing to reduced upstream earnings, somewhat offset by robust chemical and downstream results. Also, earnings for the second quarter of 2015 fell sequentially by $750M, primarily due to the depressed upstream and downstream earnings were somewhat offset by enhanced chemical results.

The planned selling of non-core assets is expected to deliver healthy proceeds for the company to support it in continuing with its major operations successfully while delivering improved shareholder returns.

Exxon is doing the right thing by diversifying its business. It has recorded strong upstream volume growth of ExxonMobil with the company’s oil-equivalent basis production increasing 3.6 percent over the second quarter of 2014. Liquids production added to 2.3 million barrels per day, an increase of 243,000 barrels per day and allowed by positive entitlement impact coupled with healthy growth in project somewhat offset by field production decline.

ExxonMobil has delivered 10.1 billion cubic feet per day of natural gas production for the second quarter of 2015, down 622 million cubic feet per day from the same period last year owing to unfavorable regulatory standards in the Netherlands. Again, ExxonMobil is observed to be focused on expanding high-quality production at the key drilling projects while minimizing non-core expenditures to sustain operational profitability.

Conclusion

So, Exxon Mobil is making a few positive moves that investors should take note of. Hence, it is likely that Exxon Mobil will make a recovery in the long run on the back of strong production growth and diversification.